In re Genetically Modified Rice Litigation

251 F.R.D. 392, 2008 U.S. Dist. LEXIS 62989, 2008 WL 3539879
District Court, E.D. Missouri·Decided August 14, 2008·No. No. 4:06MD1811 CDP·Published·Cited by 3 cases

Opinion

[393]*393 MEMORANDUM AND ORDER

CATHERINE D. PERRY, District Judge.

The twenty-one lead plaintiffs in this multi-district litigation have filed a motion to certify their claims as a class action under Fed.R.Civ.P. 23(b)(3). Plaintiffs, the majority of whom are U.S. long grain rice producers, allege that the defendants contaminated the U.S. rice supply with non-approved genetically modified strains of rice, thereby affecting the market price for plaintiffs’ crops. Defendants oppose class certification, arguing that the common issues presented in plaintiffs’ cases do not predominate over individual disputes concerning plaintiffs’ claimed damages. I conclude that this case is inappropriate for class certification because plaintiffs’ varying claims for damages are not amenable to class-wide adjudication.

I. Background

The following facts are taken from the plaintiffs’ master consolidated class action complaint, as well as the affidavits and other evidence submitted by the parties in briefing the motion for class certification.

A. Contamination of U.S. Rice Supply

On August 18, 2006 the United States Department of Agriculture announced that trace amounts of LLRICE 601, a genetically modified rice strain, had been detected in the U.S. rice supply. LLRICE 601 is a rice seed developed by Bayer CropScience,1 and is designed to be resistant to a Bayer herbicide, Liberty Link. Bayer and its corporate predecessors developed LLRICE through research in Europe, and later conducted field testing of the rice in this country. Plaintiffs allege that as a result of this activity, the genetically-modified rice strain contaminated the U.S. commercial rice supply. Although LLRICE 601 is now deregulated by the USDA, at the time of the contamination it was not approved for human consumption.

Following the contamination announcement, rice importers reacted by banning the importation of U.S. rice. Japan announced on August 20, 2006 that it would no longer import U.S. long grain rice. Three days later, the European Union announced that it would require all incoming U.S. rice to be tested and certified as free of genetically-modified traits. The nations of Russia, Canada, the Philippines, Taiwan, and Iraq also imposed restrictions on U.S. rice imports as a result of the LLRICE contamination.

[394]*394Plaintiffs allege that the U.S. market price for rice dropped dramatically as a result of Bayer’s contamination of the rice supply. The United States is one of the leading producers in the world of rice, accounting for approximately 13% of the worldwide rice trade. Nearly half of the U.S. rice supply is exported to other countries. Thus, even though the USDA ultimately approved LLRICE 601, the export market for rice was substantially affected by contamination from the genetically-modified strain. In addition, in early 2007 Bayer announced that a second genetically-modified strain, LLRICE 604, had also been detected in the commercial rice supply. Unlike LLRICE 601, LLRICE 604 has never been approved by the USDA for human consumption. Neither strain has ever been sold or marketed by Bayer.

B. Plaintiffs’ Claims

The plaintiffs in the master consolidated class action complaint are rice producers from five U.S. states where rice is grown and harvested: Arkansas, Louisiana, Mississippi, Missouri and Texas. Plaintiffs’ complaint asserts statutory and common law claims of public nuisance, private nuisance, negligence, products liability, and strict liability for ultra-hazardous activities. Plaintiffs’ primary claim for damages, however, is that the defendants’ activities caused a market loss injury to the U.S. rice market. Plaintiffs point specifically to the Chicago Board of Trade (CBOT) price of rice for the period from August 18, 2006 to August 23, 2006. Plaintiffs claim that a dramatic price drop during that time period can be attributed to the defendants’ actions and the LLRICE contamination announcement. Plaintiffs further claim that the market injury persisted beyond that time frame, causing economic harm to any rice producer who priced his or her 2006 or 2007 crop after August 18, 2006.

Other losses asserted by plaintiffs also relate to the LLRICE contamination. After the LLRICE problem was discovered, two rice varieties — Cheniere and CL 131 — were banned from planting for the 2007 crop year because of contamination. Some plaintiffs allege that as a result of this ban, they were forced to plant alternate, lower-yield seed varieties, thereby reducing the size of their harvests. Other plaintiffs allege that they were unable to obtain any rice seed because of the ban, and had to plant different crops altogether. Plaintiffs who produced rice during the 2007 crop year incurred added costs in testing and segregating their rice to make sure it was free of genetically-modified traits. Land, equipment, and storage facilities were also contaminated and had to be cleaned to prevent further contamination.

C. Rice Markets and Pricing of Rice Crops

Plaintiffs point to the CBOT market price as the gauge for measuring the harm inflicted by the contamination. However, to assess a particular plaintiffs actual damages, it is necessary to look at how a plaintiffs sale of rice is actually connected to the CBOT market price index. Rice producers sell their rice in a variety of ways. The simplest, most direct sale is done on a cash basis, whereby a producer is paid upon delivery. The price received is indexed to the current CBOT price per hundredweight. Other rice producers sell their rice through seasonal pools or cooperatives. A producer’s rice is pooled with rice from other producers, and is then sold collectively at a specified time. Each producer receives a pro-rata share from the cooperative. Still other producers sell rice through booking contracts — a producer will contract with a buyer in advance to deliver a specified quantity of rice on a certain date. The price per hundredweight may be fixed at the time of contract, or time of delivery, or some time in between. The buyer may specify a particular quality or milling weight for the rice to be delivered, and a deviation from that quality may result in a penalty or premium.

Some rice producers’ contracts are dependent on the calculation of a basis, in addition to the CBOT price. A basis is a specified adjustment between the national CBOT price and the local price offered by a particular buyer. If, for example, the CBOT price is listed as $10 per hundredweight, and a local buyer is offering to buy rice at $9.50 per hundredweight, the $0.50 adjustment is that buyer’s “basis.” Thus, where a basis is involved, the price received by the producer is [395]*395dependent both on the fluctuating CBOT price and on a particular buyer’s fluctuating basis. Basis may fluctuate over time and from one buyer to the next. Under a “basis contract,” a rice producer and a buyer agree on a fixed basis before delivery. A contract might call for “30 cents under CBOT.” The $0.30 basis would remain fixed, and the market price would continue to fluctuate until delivery. The flip side of a basis contract is a “hedge to arrive contract.” Under this arrangement, a price based on the market would be agreed to in advance. The basis term would then be left open and fixed at a later date.

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In re Genetically Modified Rice Litigation, 251 F.R.D. 392, 2008 U.S. Dist. LEXIS 62989, 2008 WL 3539879 (E.D. Mo. 2008).

251 F.R.D. 392 (In re Genetically Modified Rice Litigation) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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